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Web companies turn against online casinos
PAYPAL, YAHOO AMONG SITES THAT WILL STOP ACCEPTING ADS FOR GAMBLING
By Chris O'Brien
Mercury News
Web sites increasingly are accepting advertising from Internet gambling sites. And search engines are benefiting from the big fees online casinos will pay for placement -- far more than the fees for adult Web sites.
Some companies, however, have decided that casino money isn't worth the risk given gambling's dubious legal status in the United States and the attempts by some state and federal officials to crack down.
Just this week, PayPal of Mountain View was subpoenaed by the New York Attorney General's office, which is investigating online gambling. And eBay announced Monday that PayPal, which processes online payments, will stop doing business with Internet casinos after it is acquired by the big online auction firm.
Yahoo said Friday it would soon stop accepting gambling ads, though it will continue making money from online casinos who pay for search engine placement. And CitiBank, under pressure from the New York Attorney General's office, recently said it will no longer allow its credit cards to be used on gambling Web sites.
``There's obviously money there,'' said Lisa Strand, director and chief analyst for NetRatings of Milpitas. ``But when they look at their legal liability, I think a lot of companies are realizing it's not worth the risk.''
Gambling outside of authorized venues is illegal in much of the United States. But Internet wagering has flourished, with most gambling Web sites operating outside the United States in order to skirt state and federal regulations banning or restricting the activity.
Online gambling sites took in $2.5 billion in revenue last year, according to InformaMedia Group, a company that tracks electronic gambling. That's about 1 percent of conventional gambling revenue, but it's expected to grow to $14.5 billion by 2006.
Clicking through
A beneficiary of that growth is Overture, a Pasadena company that's the leading ``pay for placement'' search engine. Web sites pay Overture for each visitor who ``clicks through'' to their Web site.
According to Overture, the average Web site pays about 24 cents for each ``click through.'' By comparison, a check of the Overture site on Friday showed gambling sites willing to pay up to $20 for each person who clicked through.
Overture doesn't break out its revenue by industry segment and a spokesman for the company declined to say how important gambling money is to the site.
However, part of this money from gambling sites flows to major Internet portals, including Yahoo and MSN. Overture provides these paid search results to portals who then get a cut of the revenue when a visitor clicks through to one of the online casinos.
Gambling has also caught the attention of the adult online industry. Sex.com, an adult content portal that provides paid adult search listings, has added a new gambling section to its Web site after it became apparent that gambling operators were willing to pay more than adult sites for each visitor who clicked through.
``We felt the traffic on our site might be interested in the gaming world,'' said Gary Kremen, CEO of Sex.com. ``It seems that the value of gaming is higher than adult sites.''
Advertising boost
But gambling money has spread far beyond search engines. In February, Jupiter MediaMetrix reported that ads from online casinos had increased from 911 million ad viewings in December 2000 to 2.5 billion viewings a year later.
Gambling rose from being the eleventh largest advertiser to the fifth during that period, Jupiter MediaMetrix said. While such ads once mainly appeared on gambling sites, by the end of 2001, about 39 percent of the ads were appearing on general Internet portals, according to the Jupiter report.
At Yahoo, however, executives have decided they will soon stop taking ads from gambling sites after weighing the impact of such ads on its image vs. its need to be profitable.
``Over the past few months, management has been evaluating our operations,'' said Diana Lee, a Yahoo spokeswoman. ``One of the results of that review was to discontinue gambling advertising.''
Even as the industry grows, it faces an increasingly murky regulatory outlook. Several bills have been introduced in Congress in recent years designed to ban financial institutions from doing business with Internet gambling sites.
And the New York Attorney General's office has been attempting to crack down on companies that do business with online casinos.
It was this uncertain outlook that eBay executives cited when they said PayPal would stop processing payments for online gambling sites. They pulled the plug on PayPal's gambling business even though it accounted for 30 percent of PayPal's traffic and 8 percent of its revenues.
On Friday, calls to PayPal and the New York Attorney General's Office were not returned.
PAYPAL, YAHOO AMONG SITES THAT WILL STOP ACCEPTING ADS FOR GAMBLING
By Chris O'Brien
Mercury News
Web sites increasingly are accepting advertising from Internet gambling sites. And search engines are benefiting from the big fees online casinos will pay for placement -- far more than the fees for adult Web sites.
Some companies, however, have decided that casino money isn't worth the risk given gambling's dubious legal status in the United States and the attempts by some state and federal officials to crack down.
Just this week, PayPal of Mountain View was subpoenaed by the New York Attorney General's office, which is investigating online gambling. And eBay announced Monday that PayPal, which processes online payments, will stop doing business with Internet casinos after it is acquired by the big online auction firm.
Yahoo said Friday it would soon stop accepting gambling ads, though it will continue making money from online casinos who pay for search engine placement. And CitiBank, under pressure from the New York Attorney General's office, recently said it will no longer allow its credit cards to be used on gambling Web sites.
``There's obviously money there,'' said Lisa Strand, director and chief analyst for NetRatings of Milpitas. ``But when they look at their legal liability, I think a lot of companies are realizing it's not worth the risk.''
Gambling outside of authorized venues is illegal in much of the United States. But Internet wagering has flourished, with most gambling Web sites operating outside the United States in order to skirt state and federal regulations banning or restricting the activity.
Online gambling sites took in $2.5 billion in revenue last year, according to InformaMedia Group, a company that tracks electronic gambling. That's about 1 percent of conventional gambling revenue, but it's expected to grow to $14.5 billion by 2006.
Clicking through
A beneficiary of that growth is Overture, a Pasadena company that's the leading ``pay for placement'' search engine. Web sites pay Overture for each visitor who ``clicks through'' to their Web site.
According to Overture, the average Web site pays about 24 cents for each ``click through.'' By comparison, a check of the Overture site on Friday showed gambling sites willing to pay up to $20 for each person who clicked through.
Overture doesn't break out its revenue by industry segment and a spokesman for the company declined to say how important gambling money is to the site.
However, part of this money from gambling sites flows to major Internet portals, including Yahoo and MSN. Overture provides these paid search results to portals who then get a cut of the revenue when a visitor clicks through to one of the online casinos.
Gambling has also caught the attention of the adult online industry. Sex.com, an adult content portal that provides paid adult search listings, has added a new gambling section to its Web site after it became apparent that gambling operators were willing to pay more than adult sites for each visitor who clicked through.
``We felt the traffic on our site might be interested in the gaming world,'' said Gary Kremen, CEO of Sex.com. ``It seems that the value of gaming is higher than adult sites.''
Advertising boost
But gambling money has spread far beyond search engines. In February, Jupiter MediaMetrix reported that ads from online casinos had increased from 911 million ad viewings in December 2000 to 2.5 billion viewings a year later.
Gambling rose from being the eleventh largest advertiser to the fifth during that period, Jupiter MediaMetrix said. While such ads once mainly appeared on gambling sites, by the end of 2001, about 39 percent of the ads were appearing on general Internet portals, according to the Jupiter report.
At Yahoo, however, executives have decided they will soon stop taking ads from gambling sites after weighing the impact of such ads on its image vs. its need to be profitable.
``Over the past few months, management has been evaluating our operations,'' said Diana Lee, a Yahoo spokeswoman. ``One of the results of that review was to discontinue gambling advertising.''
Even as the industry grows, it faces an increasingly murky regulatory outlook. Several bills have been introduced in Congress in recent years designed to ban financial institutions from doing business with Internet gambling sites.
And the New York Attorney General's office has been attempting to crack down on companies that do business with online casinos.
It was this uncertain outlook that eBay executives cited when they said PayPal would stop processing payments for online gambling sites. They pulled the plug on PayPal's gambling business even though it accounted for 30 percent of PayPal's traffic and 8 percent of its revenues.
On Friday, calls to PayPal and the New York Attorney General's Office were not returned.